Japan pensions pay out after 10 years of paying in: Changes to the pension system

Recent changes to Japan’s National Pensions System now mean that those enrolled, including foreign residents of Japan, are entitled to claim pensions after 10 years of paying in, down from 25 years.

The change to the pension system was quietly slipped in as of August 1, 2017 with an announcement on the Japan Pension Service website, both the Japanese and English-language versions. Not being a regular visitor to the site, the first this expat heard about it was from an article in The Japan Times dated Sept. 17, 2017.

The article’s headline features prominently the term “non-Japanese residents” leading this expat to initially think that this was some wrong inflicted upon foreign residents only, that had finally been set right (or at least made a little less wrong). Heading over to the Japan Pension Service website to read further reveals that this is, in principle, a universal change affecting all of those covered by (read, paying into) Japan’s state pension scheme (the change applies to both kōsei nenkin / employees’ pension insurance and kokumin nenkin / national pension) foreign resident or Japanese national.

It’s perhaps right that “foreign residents” should be highlighted though, as being the demographic most likely to benefit, or at least get even, from the recent change to pension structure. Such is the often times itinerant nature of the overseas national, expats in Japan may have, prior to August 1, been faced with the prospect of having paid, say, 24 year’s worth of premiums, only to then have to leave Japan and face the indignity of only being able to claim back a lump sum payment the equivalent of three years of pension benefits. At least from now, that pill may be a little easier to swallow.

Benefits can be claimed as of now. For those unsure of what kind of payments they have already made, records can be accessed at Nenkin Net (https://www.nenkin.go.jp/n_net/), although good luck trying to navigate the registration / log in process (Japanese required).

Claims can be made from overseas, too. Regardless of location though, filling out the required forms looks daunting and will likely require the support of a local. For those in Japan, it might be best to head first to the nearest JPS branch office. If this expat is correct in their reading of Japanese, the forms that need to be filled out are thus (Japanese): http://www.nenkin.go.jp/oshirase/topics/2017/20170801.files/1.pdf

The recent changes haven’t affected the age of eligibility to claim on one’s pension in Japan which currently stands at 65.

“The National Pension is a public pension system participated by all persons aged 20 to 59 years who have an address in Japan, which provides benefits called the “Basic Pension” due to old age, disability, or death.”

So reads the opening blurb of an introduction to the National Pension System on the English-language version of the Japan Pension Service website. The untruth can be spotted immediately, “all persons” are not paying into it, especially in the case of foreigners in Japan. To be fair, it’s a tough sell to the expat who might only stay in Japan for a year or two. Essentially, they might has well just give the money directly to an elderly neighbour, as they won’t be getting any return on it during the evening of their days. And it’s not an insignificant amount. Current contributions for the National Pension (kokumin nenkin) stand at 16,490 yen per month. So, many choose not to pay, and many employers choose not to do likewise with the employees’ pension insurance (kōsei nenkin).

This is a problem that authorities in Japan are likely to face with greater frequency as they look overseas to fill labor shortages and put on their most cosmopolitan guise ahead of the 2020 Tokyo Olympics - many foreigners come to Japan with the idea of staying for only a year or two. With that in mind, pension premiums seem like a waste of money so they don’t pay. But then something keeps them in Japan. But they still haven’t made that first pension payment and are reluctant to do so for fear of back payments. So they delay for a bit. Worry about it later. And later still.

One of the problems is that, in the early stages of life in Japan, there’s little in the way of punishment for not enrolling in the state pension systems, and it probably doesn’t occur to many to even think about it. Those that are aware, hear the numbers - 25 years (now down to 10), potentially 16,000 + yen, and miserly three-year lump sums, and lose interest pretty quickly. Of course, the best way to avoid any back payments is to find an employer willing to do the right thing and put their foreign staff onto the employees’ pension insurance (in which case no back payments, either for health insurance or pension, are required).

As I’m sure we’re all curious, those that do pay into Japan's pension system for the full 40 years (from age 20 up to and including 59) will stand to get a Basic Pension amounting to 779,300 yen a year.

Whether or not the reduction of 25 years to 10 years will be seen positively by Japan’s expat community, such that they get on board with this nation’s pension system more promptly, remains to be seen. It certainly sounds like a positive step, but then if this is the case, why not shout about it a little more, instead of adding it as footnote to a website that few people check, or even know exists? Could it be that this is a reluctant change, or are the authorities worried about drawing attention to the fact that, until very recently, it used to take 25 year’s worth of pension payments before any benefit was returned?

The reality though, is that one only needs to have paid into the pension system for six months in order to get at least something back from it. This is the case for those who leave Japan and relates to that three-year lump-sum payment that was mentioned earlier (officially - Lump-sum Withdrawal Payments). Claims for these payments need to be filed within two years of leaving Japan. The details can be found on this English-language document produced by the Japan Pension Service: http://www.nenkin.go.jp/international/english/lumpsum/lumpsum.files/01.pdf

Japan is also part of something called the International Social Security Agreement, a scheme which shares compulsory pension payment coverage between reciprocal countries, preventing the possibility of having to make “double payments”. (Very basically, payments that you might make in Japan will also be seen as contributing to a state pension of the country to which you might one day return). At the time of writing, countries in the agreement were the following: United States, Belgium, France, Canada, Australia, Netherlands, Spain, Ireland, Brazil, Switzerland, Hungary, India, and Luxembourg. Czech Republic, Philippines and Slovak Republic were all under the status of “preparation for implementation”. Agreements with the United Kingdom, Republic of Korea, and Italy (the latter under “preparation for implementation”) eliminate the necessity of dual coverage (i.e dual payments) only. Read more about the International Social Security Agreement at the Japan Pension Service homepage.

In all of this it might be worth highlighting a potential misconception, on the part of this expat at least, about what the term “pension” and the Japanese equivalents of kōsei nenkin and kokumin nenkin actually point to. Perhaps there exists in some of us that the idea that paying into a state pension scheme is a somewhat selfish one - this is money that will be kept to one side to come back to me at a later stage. Whatever the actual definitions or original purpose, the reality is, that in ageing Japan, this money is needed now and that which is no longer available in the future, presumably all of it, (when the people paying it now are in need of some return) will likely have to be made up by the workforce at that time.

Were you aware of the recent changes to Japan’s National Pensions System? Let us know in the comments.